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COMPETITION WATCH: CP Rail acquires largest US regional railway

CALGARY, Alta. -- Canadian Pacific (CP) Railway has extended its network by acquiring the Dakota, Minnesota and Eas...


CALGARY, Alta. — Canadian Pacific (CP) Railway has extended its network by acquiring the Dakota, Minnesota and Eastern Railway Corporation (DM&E).

CP paid US$1.48 billion for the railway, expanding its network by about 2,500 miles and increasing access to the US Midwest. The deal also involves future contingency payments.

“The DM&E is an excellent fit for Canadian Pacific making this a strategic end-to-end addition to our network,” said Fred Green, president and CEO of CP. “The DM&E is a high-quality, growing regional railroad that complements our existing franchise. This investment presents the opportunity for future growth through further expansion of our network and is accretive to our EPS in 2008.”

He added: “There are natural synergies between our two railroads which make this a very attractive transaction. We have a solid transition plan that I am confident we will implement successfully. CP is the safest railroad in North America and we will work together to build on the significant improvements the DM&E has made in operating efficiency and safety over the past several years. This includes CP’s intention to spend an additional US$300 million of capital for further upgrading of the regional railroad over the next several years.”

The DM&E is the largest regional railroad in the US. It boasted 2006 freight revenues of US$258 million, which is forecast to grow by 9% this year. Its rolling stock includes 7,200 rail cars and 150 locomotives. CP will utilize the railway to serve Wyomings Powder River Basin North Americas largest and most rapidly growing source of low-cost, low-sulfur coal.

“Canadian Pacific is excited about the prospect for growth in the coal-rich Powder River Basin,” Green said.


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